Experts warn of economic ‘day of reckoning’ as Victorian businesses close in record numbers, unemployment on the rise
A leading expert has warned of a looming economic “day of reckoning” after new data revealed businesses in Victoria are closing in record numbers and the unemployment rate has continued to rise.
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Victoria is facing an economic “day of reckoning” amid Victorian businesses closing in record numbers and continued rising unemployment, experts have warned.
New data released this week showed a 48 per cent annual increase in the number of businesses that either collapsed or had a financial controller appointed over the last financial year.
The Australian Securities and Investment Commission figures revealed 4242 businesses collapsed across the state, more than double the year-on-year growth of New South Wales.
At the same time the unemployment rate worsened by 0.2 points to 4.6 per cent, according to the Australian Bureau of Statistics.
With 181,000 Victorians out of work, Victoria has for 16 consecutive months now had the highest, or equal highest, unemployment rate in the country.
The Allan government defended the figures saying Victoria’s economy had grown faster than any other state and was 31 per cent larger than when Labor came to office in 2014.
“The number of Victorians in work is at an almost record level and both the participation rate and the share of Victorians employed are at historically high levels, with more than 84,000 Victorians finding work over the past year, the largest increase in the country,” a government spokesperson said.
Independent economist, Saul Eslake, said insolvencies were driven by challenges in the construction and hospitality sectors as well as a post-Covid crackdown on tax compliance.
But he warned amid better than average benchmarks the worst was yet to come for Victoria.
“It’s interesting that the Victorian Government’s financial woes are yet to have an obvious impact on Victoria’s economy,” he said.
“For example retail sales in Victoria grew 4.4 per cent, in trend terms, over the year to May, compared to 3.5 per cent for Australia as a whole and just 2.0 per cent in NSW.
“Residential building approvals are running at a higher level in Victoria than in NSW …
employment grew 2.2 per cent, in trend terms, in Victoria over the year to June compared to 2.1 per cent nationally and 1.6 per cent for NSW.
“I’m sure there’ll be a day of reckoning for the Victorian economy as a result of the mismanagement of state finances by the current government, just as there was in the early 1990s, but it hasn’t happened yet.”
Small Business Australia executive director Bill Lang said the state’s pandemic experience was continuing to haunt business owners.
And he called for a clearer vision for driving down debt and improving business opportunities to encourage investment across the state.
Victoria is currently on track to hit a record net debt level of $194bn by 2028-29.
Victorian Chamber of Commerce and Industry Acting Chief Executive Antoinette Truda said the figures were “deeply concerning but sadly not surprising”.
“Victorian businesses are under intense pressure. Soaring costs including high energy prices, compounding state taxes, skills shortages, and regulatory burdens, are pushing many to the brink and these latest figures show that for too many, the breaking point has come,” she said.
“Decisive action is needed to restore confidence and create conditions for growth. We must see businesses relieved of unnecessary costs and regulation, to enable them to invest in people, innovation and productivity.
“The pathway out of this downturn starts with listening to business. We need to support employers to stay open, grow and take on staff.
Shadow treasurer, James Nebury said: “Jacinta Allan and her Labor Government’s tidal wave of increased tax, increased overheads, and energy costs, are burying small businesses in record numbers.”
“This Labor Government is nation leading at driving business out of business.”
Originally published as Experts warn of economic ‘day of reckoning’ as Victorian businesses close in record numbers, unemployment on the rise
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